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Ethereum declines further as liquidations surpass those of Bitcoin

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FXStreet in Market News 12 387263
May 1, 2024 04:02

content provided with permission by FXStreet

  • While a few whales are dumping ETH following its recent price decline, exchange supply data shows most investors are bullish.
  • Hong Kong spot Bitcoin and Ethereum ETFs underperform issuers’ expectations on the first day of trading.
  • Ethereum liquidations have exceeded those of Bitcoin.

Ethereum (ETH) experienced a further decline on Tuesday following a disappointing first-day trading volume for Hong Kong’s spot Bitcoin and ETH ETFs. This comes off the back of increased long liquidations and mixed whale activity surrounding the top altcoin.

Read more: Ethereum erases weekend gains as yearlong SEC investigation comes to light

Daily digest market movers: Whale activities, Hong Kong’s ETH ETFs, liquidations

Ethereum’s decline has triggered increased long liquidations in the past 24 hours. Here are key market movers for the largest altcoin:

  • Asset manager Grayscale transferred 5,626 ETH worth $17.83 million to liquidity provider Flow Traders on Tuesday, according to data from Lookonchain. Grayscale has transferred ETH to Flow Traders four times in the past three months, totaling 23,178 ETH worth $71.3 million.
  • While a few whales may be selling in the short term, Glassnode data reveals ETH’s exchange supply has declined and is dropping even faster than Bitcoin. This aligns with several whale activities in the past three weeks as exchanges like Binance have experienced massive ETH withdrawals. Hence, most investors may be holding on to Ethereum with the expectation of a rally in the long term.
  • Founder of Tron blockchain Justin Sun, who has been linked with several whale ETH purchases since March, shared his thoughts on the Ethereum staking and restaking boom.

    He shared that restaking and staking protocols have made significant progress and will spin off into operating entities to support blockchain networks worldwide. Several crypto community members highlighted that this may be the reason for his potential ETH buying spree in the past weeks.

Also read: Bitcoin, Ethereum Spot ETF in Hong Kong sees underwhelming response with $12 million in trade volume

  • Despite high projections by issuers for Hong Kong’s spot Bitcoin and Ethereum ETFs, they underperformed widely, bringing in a total trading volume of about $12 million on their first day. This is barely a pinch compared to the $4.6 billion first-day trading volume of Bitcoin ETFs—383 times higher than that of Hong Kong.
     
  • Following ETH’s further decline on Tuesday, its liquidations have exceeded Bitcoin’s for the second consecutive day on Tuesday. Ethereum has seen a total of $91.76 million in liquidations compared to Bitcoin’s $68.51 million. The market decline is hitting hard on ETH long traders, who have experienced $73.62 million in liquidations.

ETH technical analysis: Key level could prove strong to prevent further decline

Ethereum saw another day of increased decline as prices slipped below the $3,000 key level on Tuesday. Considering the market has been waiting on a price trigger since the week began, the disappointing trading volume of Hong Kong’s spot BTC and ETH ETFs caused the sharp decline.

Also read: Ethereum cancels rally expectations as Consensys sues SEC over ETH security status

While short-term price movement indicates more decline, exchange withdrawals from long-term bulls could be a strong support to prevent a decline below the $2,852 key level.

ETH/USDT 4-hour chart

ETH/USDT 4-hour chart

Hence, if ETH fails to break below this level, it may bounce up to fill up recent market inefficiencies. ETH’s recovery from this descent could see it break past the $3,300 key level to tackle inefficiencies at the $3,454 level formed on April 12. This thesis may be invalidated if a key macro event significantly affects the crypto market.

Ethereum FAQs

Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.

Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.

Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.

Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.